From ADB to BOJ: a ‘twofer’ for Abe?

WASHINGTON – Just as recently re-elected U.S. President Barack Obama struggles to get his top choices in place at the U.S. Departments of Defense and Treasury, newly elected Prime Minister Shinzo Abe is having personnel challenges of his own. One choice by Abe, however, may well offer him a “twofer” — a chance to both reshape Japan and one of Asia’s leading multilateral institutions.

If media reports are accurate, Abe and Finance Minister Taro Aso have still to agree on a nominee for governor of the Bank of Japan (BOJ), a particularly critical post given “Abenomics” fiscal policy goals and the BOJ’s 2 percent inflation target.

The nomination to run Japan’s central bank must be submitted to Japan’s parliament for approval, much as the U.S. president’s nominations for top government posts must go to the U.S. Senate for its “advice and consent.” Current BOJ governor Masaaki Shirakawa and his two deputies are scheduled to step down March 19, increasing the pressure for prompt action if vacancies are to be avoided.

Former BOJ deputy governors Toshiro Muto and Kazumasa Iwata are top contenders. Haruhiko Kuroda, president of the Asian Development Bank (ADB), is a third widely cited potential nominee. Since the Manila-based ADB’s founding in 1966, its president traditionally has been chosen from the ranks of former high-ranking Japanese Ministry of Finance officials or others with close ties to the ministry.

In Washington, potential nominees for jobs ranging from ambassadors to Cabinet secretaries are advised by the White House and others to not comment publicly on their ambitions or chances for a key post. It’s always an honor to be nominated, and if confirmed by the U.S. Senate — as the messaging goes — it would be an honor to serve. And indeed it was, when I went through the process and was ultimately confirmed by unanimous consent of the Senate in 2007 as the U.S. ambassador to the Asian Development Bank.

For 3½ years under Presidents George W. Bush and Obama, I continued the bipartisan U.S. push for a more efficient and effective ADB, working toward an institution that would better keep pace with a rapidly changing Asia. My time in post also overlapped with Kuroda’s.

First chosen as ADB president by the institution’s Board of Governors in 2004, Kuroda was re-elected for a full five-year term beginning in November 2006. He was re-elected for another five years in 2011, though some speculated he might resign, clearing the way for another Japanese official to move into the post.

Without taking a position as to who might be best to run the BOJ — a decision that ultimately is up to the Japanese and best left to their own back room discussions and search for consensus — I take note of the opportunity that might exist for Japan whenever the next ADB president is chosen.

During the last few years, the World Bank and International Monetary Fund (IMF) — both founded in 1944 to advance development and financial stability — have seen major challenges and changes. Former minister Christine Lagarde of France became the first woman to take the reins of the IMF. Korean-American physician Jim Yong Kim became the first from outside politics and finance to lead the World Bank.

Yet, while Europe and the United States retained locks on the top positions, the selection processes and discussions were more open than ever. In time, there might well be similar conversations about who should next lead the ADB.

Officially the ADB board of governors will elect the institution’s next president from nominees put forth by member governments. Cynics argue that after much talk of a search for the best candidate, a former Japanese finance official — perhaps IMF deputy managing director Naoyuki Shinohara — will be chosen.

Time will tell if that storyline plays out. Indeed, supporters of more effective international financial institutions can make the case for the top jobs continuing to be held by qualified candidates from these organizations’ major shareholders and largest financial contributors.

The United States is the major shareholder at the World Bank. Long-time allies Japan and the U.S. are the ADB’s co-equal largest shareholders, with Japan providing significant added financial support through a range of special funds.

Together, the two nations have played key roles in driving important ADB efforts to fight poverty across the region, including in Afghanistan and Pakistan. Where disagreement exists, however, is to what degree nationality should trump qualifications and experience in filling top posts at the ADB below that of president and vice president. In one example, a Japanese bureaucrat regularly serves as head of the bank’s most critical functions: budget, management and personnel.

The relatively recent leadership changes at the World Bank and IMF, however, suggest that even if nationality is taken into account, future ADB leaders could come from a wider pool of qualified candidates than just from Japan’s bureaucracy. Others have also joined me in noting that what is more constraining, and potentially damaging in the long run to employee retention and morale, is for middle management to be chosen with nationality as a primary factor.

Professional staff should be recruited, chosen and promoted transparently and based on merit. Board oversight should include strengthened governance of ADB’s human resources practices, and greater focus on holding management accountable for shortcomings in not just development results but also such areas as staff retention and recruitment of qualified women.

Asia, including Japan, has changed significantly since the ADB’s founding 47 years ago. Then the Philippines was one of the region’s richest nations and China was increasingly cut off from the world. Today, an increasingly assertive China challenges its neighbors economically, if not militarily, as it continues to borrow, with Japan’s support, from the World Bank and ADB.

As Abe moves forward with his nominee to lead the BOJ, he may well decide to make no changes at the ADB. But whether now or years from now, it will make sense for whoever the prime minister is to also think differently about how the supposedly best qualified candidates are chosen to lead, manage and staff Asia’s leading international organizations.

As Lagarde at the IMF and Kim at the World Bank now show, not every European or U.S. leader at these institutions need look or act like the ones before. Abe may well choose a very different kind of BOJ leader to help drive change in Japan’s economy. But whether he does or not, there is a case for evolution in the Japanese approach to the ADB. Such change could benefit Japan as well as the poorest and least developed nations that the ADB seeks to serve.

Curtis S. Chin served as U.S. ambassador to the Asian Development Bank under Presidents George W. Bush and Barack Obama (2007-2010). He is a senior fellow and executive-in-residence at the Asian Institute of Technology, and a managing director with RiverPeak Group.